I have worked alone on an application for 6 months*. Recently somebody who would be of great value has entered the picture and I would like to take them on as a partner. Neither of us knows how best to structure the company so that it's maximally fair and incentives are optimized.

An uneven equity split seems to be one option, a buy-in figure for the existing codebase may be another. Is there another structuring tool we should consider?

*In fact we both contributed the very first month, then other commitments meant he could not continue until now. So there has been a 1:6 ratio of shared work:solo work months.

If it's just a code base and not a business I would say something more or less even. If the company succeeds you're going to be working on it for a long time so 5 extra months won't be all that much. I'd do some reading on cofounder equity splits and decide whether you feel optimising for a few percent is a better option than just splitting evenly. I think I would stagger vesting based on your start date and his (new) start date, though.

I could see some sort of buyout being reasonable, but feel it could also be quite unattractive for your prospective cofounder given the already significant exposure one has when starting a company.

I would be more inclined to come up with something recognising your 5 months of effort if you feel your prospective cofounder's commitments were more of convenience and not being willing to take the risk at that stage. I would want to avoid the situation where some years down the line your cofounder feels slighted for what's then a blip on the radar of effort, but likewise it's also important you don't feel the same in the short term.

I was in a similar situation at the beginning of this year (except in the inverse position). If you've been mostly hacking and haven't gone and gotten customers, raised real funding, etc. and you're pursuing this as a true startup - meaning if this is working you could be working on it for up to a decade and you truly think having this person as a true partner would be a huge win - would highly advise a pretty much equal split. The truth is most of that early code is going to be rewritten and it's more of a project than a company so far (again, assuming you aren't in a meaningful number of customers' hands, etc). 51/49 with you in control in case things don't work out is best - almost all the work is ahead of you rather than behind you. If you're planning to flip it in a year or so to the first real buyer, then that 6mo is of course a more meaningful portion of the larger project so my advice won't hold as much.

I could see a slight tweak of equity allotments - maybe 53/47 or something - but a cash payment will feel weird when you're presumably about to take far-below market salaries for the first year or two and is likely more trouble than it's worth imo. One of the other opportunities available to me was to join another company that was a bit further along but where I'd have been the tech lead and essentially function as a co-founder but the equity wasn't enough. Make them a true partner and reap the rewards of that sentiment instead of making a short-term optimization.

Also lol at me for pretty much just repeating what skier_5 said. If you are convinced to do an almost-exactly-equal split like 51/49 or 52/48 and you plan to hire any employees that'll get equity before adding a VC to the board in your first non-angel/pre-seed round, there are a few legal/control nuances you should be aware of but won't type up a ton of stuff if it isn't applicable.

Why is it assumed a VC or angel funding is coming or there is going to be any seats on any boards. Sounds like most small businesses where there is no board and raising money is very difficult in general